Effect of the ban on short selling on market prices and volatility

Research output: Contribution to journalArticleResearchpeer-review

2 Citations (Scopus)

Abstract

We examine the effects of the short-selling ban, imposed by Australian regulators in the wake of the global financial crisis, on the trading of financial stocks. Our findings argue against commonly stated reasons for imposing short-sale bans. We find no evidence that short-sale restrictions provide support for stock prices or that they reduce volatility. Moreover, stocks subject to the short-selling ban suffered a severe degradation in market quality. Controlling for the adverse effects of the financial crisis on markets, we show that short-selling restrictions increase intraday volatility, reduce trading activity and increase bid-ask spreads.

Original languageEnglish
Pages (from-to)727-757
Number of pages31
JournalAccounting and Finance
Volume57
Issue number3
Early online date30 Mar 2016
DOIs
Publication statusPublished - Sep 2017

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Market price
Short selling
Market volatility
Short sales
Intraday volatility
Bid/ask spread
Global financial crisis
Financial crisis
Trading activity
Market quality
Degradation
Stock prices

Cite this

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Effect of the ban on short selling on market prices and volatility. / Helmes, Uwe; Henker, Julia; Henker, Thomas.

In: Accounting and Finance, Vol. 57, No. 3, 09.2017, p. 727-757.

Research output: Contribution to journalArticleResearchpeer-review

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